Colliton: Women face increased long term care premiums

Recently I had been receiving e-mails regarding increases and projected increases in premiums for long term care insurance. Then the same subject arose during appointments with clients.

What I did not realize and what took some further research to discover is that the nation’s largest long term care insurance company, Genworth, recently reached another crossroads by applying with State Insurance Commissions throughout the U.S., including Pennsylvania, to charge more — in many cases substantially more — for new policies for single, divorced, and widowed women than for men.

The difference, in some cases, may be as high as 40 percent.

According to the Wall Street Journal on-line, www.wsj.com, “Family Value – Women Face Higher Costs” by Kelly Greene, for example, “Genworth’s North Carolina rate filing shows that a 55-year-old woman buying $3,000 a month in coverage for three years with a 3 percent inflation-protection rider would pay $2,000 a year — 36 percent more than the $1,466 a man would pay.”

Gender based pricing is not exactly new to the insurance industry. Women, because of their longer life expectancy, have been charged less than men for life insurance, for instance, since claims could be expected at a later date, if at all, since policies might lapse. Of course, with life insurance, the decedent is not available to enjoy the benefit.

Long term care insurance has historically been gender-neutral although underwriting standards have become more stringent and prices have increased both for women and men. Genworth is the first major carrier to openly seek gender based pricing.

Again according to Ms. Greene, as of November 23, 2012, Genworth had filed with insurance regulators to raise prices for single women in all states but the two that require unisex rates (Montana and Colorado) and had received approvals by then in more than half of the states. With a success rate like this, all or virtually all other companies are expected to follow.

The reasoning is as follows: Women in the U.S., on average, live about five years more than men. By age 75, 7 in 10 women are widowed, divorced or have never been married. About 40 percent live alone compared to 22 percent of men. Women who live to age 65 average two years of disability requiring assistance before death. In nursing homes, 7 in 10 residents are women, according to statistics from New York Times in Feb. 6 article by Jane Gross: “The New Old Age, Caring and Coping; For Women, Reduced Access to Long-Term Care Insurance.”

By the time the wives’ long term care is needed, many husbands have predeceased. The support system may not be available to care for a woman at home.

A hidden issue that cannot legally be raised by companies is very low interest rates. Long term care insurance carriers, dependent on a market where they could invest premiums and earn enough on the investment to pay benefits along with their costs and profit, have difficulty making up the difference.

Notably, projected pricing for the new Genworth policy is different for a woman who applies alone than for a married couple. As Ms. Greene notes, married couples who buy coverage together can still get a discount under a “blended rate.”

Married women who apply on their own would pay the higher individual rate. A wife who applies with her husband where her husband is declined would still receive a discount but not as deep a discount as a couple who is approved.

A strategy for some to avoid the higher rate is to apply as a couple where possible. For instance, a wife and husband who are separated but not yet divorced could file together and the wife could receive the lower blended rate which would continue even after the divorce. Domestic partners might be able to qualify for a lower rate.

Finally, even for the general public, pricing is becoming an issue. There are fewer insurers and those that remain are charging more.

Bill Toland of the Pittsburgh Post-Gazette, in a Dec. 2, 2012, article, “Changes in store for long term care insurance,” www.post-gazette.com, cites John Hancock – 18.7 percent increase; AF&L Insurance Co. – 30.6 percent increase for some policyholders; Bankers Life and Casualty Co. - 35 percent increase; Pennsylvania requests from Allianz Life Insurance Co. for 25 percent increases; and Continental Casualty Co. for an 80 percent increase on some policyholders.

Long term care insurance along with the care is becoming more expensive.

For more, listen on Wednesdays at 4:30 p.m. to radio WCHE 1520, “50+ Planning Ahead,” with Janet Colliton, Colliton Law Associates, and Phil McFadden, Home Instead Senior Care. Live streaming is available at that time on www.wche1520.com.

Janet Colliton, Esq. limits her practice, Colliton Law Associates P.C., to elder law, life care, special needs, guardianships, and estate planning and administration with offices at 790 E. Market St., Suite 250, West Chester, Pa., 19382, 610-436-6674, colliton@collitonlaw.com. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones, CSA, co-founder of Life Transition Services, LLC, a service for families with long term care needs.